Bilateral versus Multilateral Aid

Bilateral and multilateral aid are part of the larger ideological debate about the means and the ends of development. The main objective of aid is to promote economic development and welfare of developing countries. There have been many different statistical studies with widely differing results regarding the correlation between aid and economic growth, and therefore, the debate continues.

Foreign aid is a tool of international development and is part of a huge ideological debate about the processes and the outcome of such aid. Pledged 35 years ago, the world’s richest and most affluent countries committed to meet a UN ODA (Overseas Development Assistance) target of 0.7% of GDP. Only 7 countries have ever met that target*; Norway; Sweden; Netherlands; Luxembourg; Denmark; and the UK. Two such examples of types of aid are bilateral and multilateral aid. The main theoretical difference between these two types of aid is the way in which the funds are transferred. Bilateral aid describes money which is given directly from one government to another, whereas multilateral aid comes from numerous different governments and organisations and is usually arranged by an international organisation such as the World Bank or the UN.

In theory, multilateral aid seems more appropriate for development purposes because of the higher participation of countries, high resources, political neutrality and needs driven projects, and global governance; however, in practice not all of these needs are fulfilled. We have seen an increase in bilateral aid and a stagnation of multilateral aid; an OECD report showing the period between 1960-2008 shows that 71% of aid was bilateral, compared to only 29% multilateral. Does this show a perceived effectiveness of bilateral aid, or simply a preference of the donor countries to retain control or accountability to their people rather than the people of the developing countries?

Bilateral aid allows donor countries to allocate funds to the countries that they deem the most needy and to remain accountable to their people. Bilateral aid is more transparent to the voters because they can see that this sum of money went to this country, whereas a lump of money going to an international organization gives the appearance of wasted funds. However, there is an argument for the selfishness of bilateral aid, seeking to benefit the donor countries over the recipients and maintaining economic colonial ties. On the 14th September 2016, the US approved a $38bn military aid deal with Israel, furthering US political ties to Israel and the political agenda of not recognising the state of Palestine.

Multilateral aid is generally on a larger scale and remains, theoretically at least, politically neutral and therefore needs driven. Multilateral aid tends to focus on large infrastructure projects and has a lower percentage than bilateral aid given to humanitarian aid. Historically however, multilateral aid organisations, such as the UN, have a reputation for financial inefficiency, posing harmful conditions, focusing on economic prosperity over human rights and abusing resources to the extent that much of the funds never reach the recipient countries.

Moving from statistics to society, public opinion is also divided on the matter of bilateral and multilateral aid. The two main arguments for the preference of aid is control and burden sharing. Those in favour of bilateral aid are mostly conservative, and of those that favour bilateral aid, 52% favour it due to the control it gives the country. Mostly Liberal were in favour of multilateral aid, and of those, 32% were in favour due to the element or illusion of burden sharing, sharing the responsibility of helping developing countries with other MEDC’s (more economically developed country).

But why should aid be accountable to the donor countries constituents? Aid is intended to serve the most needy, not the most fortunate. Yes, it comes out of the tax payers’ pockets, but at a negligible 0.7% of GDP, why should it matter if the people would rather see their money go to a single country rather than an NGO? Aid ought to be recipient driven, accountable to the people who require it and putting their needs central. The needs, concerns and desires of the recipients must be fully accounted for any reasonable conception of development to accurately achieve its goal, to further the freedoms of people worldwide.

As with all debates of importance, there are positives and negatives on both sides, and the choice ends up being which downsides you can live with; political selfish aid or financial inefficiency?

* According to 2013 statistics

The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.